Feds charge hedge fund

By LARRY NEUMEISTER
and TOM HAYS
The Associated Press

Published: July 26, 2013;Last modified: July 26, 2013 01:34AM

NEW YORK — One of Wall Street’s biggest and most successful hedge fund companies was a hotbed of insider trading and its embattled billionaire owner wanted to hear no evil, prosecutors said in an indictment unsealed Thursday that claimed the firm earned hundreds of millions of dollars illegally.

The criminal indictment and civil lawsuits brought against SAC Capital Advisors and related companies did not name billionaire Steven A. Cohen as a defendant, referencing him only as the “SAC owner” who “enabled and promoted” insider trading practices.

At a news conference, U.S. Attorney Preet Bharara said SAC “trafficked in inside information on a scale without any known precedent in the history of hedge funds.”

He declined to comment on whether Cohen would be charged, saying: “I’m not going to say what tomorrow may or may not bring.”

For more than a decade, the company earned hundreds of millions of dollars illegally as its portfolio managers and analysts traded on inside information from at least 20 public companies, Bharara said, announcing charges of wire fraud and four counts of securities fraud spanning 1999 to 2010. A court appearance for the firm’s lawyers was scheduled for Friday.

The possibility that the criminal case could topple the Stamford, Conn., firm, which once managed $15 billion in assets, led the prosecutor to note that the government was not seeking to freeze SAC’s assets. Bharara added that prosecutors were “mindful to minimize risk to third-party investors.”

The charges came less than a week after federal regulators accused Cohen in a related civil case of failing to prevent insider trading at the firm. While the Justice Department’s action targets SAC but not Cohen directly, the civil case brought by the Securities and Exchange Commission seeks to effectively shut him down by barring him from managing investor funds.

In a statement, SAC Capital said Thursday it “has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously.”